Following the example of the U.S. – the most mature market for demand response technologies – the utility industry in Europe is clearly on the verge of massive demand response adoption. But unless stakeholders have a clear understanding of the potential benefits, the change may prove difficult.
Why is demand response important?
Demand response is a critical component of the smart grid. Specifically, demand response technologies support the objectives of bolstering grid reliability, ensuring that supply can meet demand, redistributing consumption from peak to off-peak times, and addressing reserves, capacity, and real-time balancing.
How can utilities benefit from demand response?
Despite the different goals of functional groups within a utility, each segment can benefit from adopting demand response techniques:
- Sales can gain a competitive edge through expanded energy services.
- Trading and optimization groups are better able to balance consumption and supply.
- Generation groups can improve overall power plant utilization rates.
- Distribution system operators may require less investment in grid reinforcement and can receive congestion management support.
Another benefit of demand response relates to reserve obligations. Where each stakeholder must use part of its generation assets to supply reserves, demand response can greatly support the delivery of ancillary services – not because they’re generating energy, but because demand response allows utilities to free other sources of generation and direct their supplies elsewhere, where they’re most valuable.
While there may be conflicting interests between utility stakeholders, it’s important to recognize that each segment of a utility will experience its own improvements. Utilities are at the heart of the value created by demand response, which is generated and shared among all energy stakeholders – grid operators, balancing responsible parties, consumers, aggregators, and retailers.
Although it can be challenging to integrate and implement demand response, doing so maximizes benefits and addresses the complexity of identifying and managing the load flexibility of consumers.
One way or another – be it at the demand of customers, markets, or changing regulatory policy – demand response is coming.
You can learn more about the demand response evolution by reading the white paper, “The Benefits of Demand Response for Utilities” or by leaving a comment for discussion.